Industry classifications and environmental, social, and governance disclosure: The moderating role of CEO power

Download This Article

This work is licensed under a Creative Commons Attribution 4.0 International License.

Abstract

This study aims to investigate the moderating effect of chief executive officer (CEO) power on the relationship between industry classifications and environmental, social, and governance (ESG) disclosure using the legitimacy theory. Forty-eight public companies listed on the Indonesia Stock Exchange during the period 2012–2016 were analyzed via partial least squares. The results show that industry classifications have a significant effect on ESG disclosure. Specifically, companies in sensitive industries and companies for which the majority of the shares are owned by the government are likely to disclose more ESG information. Furthermore, our study also provides empirical evidence that CEO power plays a significant role in strengthening the relationship between industry classification and ESG disclosure. Surprisingly, CEOs of companies whose majority shares are owned by the government fail to demonstrate their role in encouraging higher disclosure of ESG. The managerial implication of this finding suggested that CEO power may be an effective mechanism in increasing companies’ commitments to disclose ESG activities. This study has practical implications by providing new insights into the role of CEO characteristics in the relationship between industry types and ESG disclosure for Indonesian companies.

Keywords: ESG, CSR, Sustainability, Industry, CEO, Legitimacy, Indonesia

Authors’ individual contribution: Conceptualization — C.P., F.F., C.J., and I.J.; Methodology — C.P., F.F., C.J., and I.J.; Investigation — C.P., F.F., C.J., and I.J.; Writing — Original Draft — C.P., F.F., C.J., and I.J.; Writing — Review & Editing — C.P., F.F., C.J., and I.J.; Project Administration — C.P., F.F., and I.J.; Funding Acquition — C.P., F.F., C.J., and I.J.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

JEL Classification: M14, M40, M41, M48

Received: 25.05.2022
Accepted: 03.03.2023
Published online: 07.03.2023

How to cite this paper: Purwantini, C., Faisal, F., Joseph, C., & Januarti, I. (2023). Industry classifications and environmental, social, and governance disclosure: The moderating role of CEO power [Special issue]. Journal of Governance & Regulation, 12(1), 242–251. https://doi.org/10.22495/jgrv12i1siart4